a16z co-founder Marc Andreessen revealed on the Joe Rogan podcast on November 28 that 30 technology founders had their accounts closed by U.S. banks due to encryption-related issues. To this end, a16z crypto published an editorial on December 6 to discuss "Debanking: What you need to know". Compiled by 0xjs@金财经, the full text is as follows:

"Debanking" (closing bank accounts) has been going on behind the scenes for many years, but now it has once again become a topic of public discussion, with many individuals, framers, companies, and The entrepreneurs most important to American innovation are speaking out about this issue. As the cryptocurrency industry and specific institutions come up time and time again in this discussion, here’s a brief explanation of the phenomenon to help separate signal from noise.

But first, what is “debanking”?

In short, debanking is when a law-abiding person or entity unexpectedly loses a banking relationship, or may even be kicked out of the banking system.

Debanking is different from the loss of banking services due to an entity being suspected or confirmed to have engaged in fraud, money laundering or other illegal activities after some investigation or other process.

Debanking can occur without any apparent investigation, detailed explanation, or advance notice, providing entities with insufficient time to move funds. The bottom line: there is no due process, appeals process, or other recourse.

Why is this important?

We have established fair banking rules to try to ensure that people are not discriminated against based on age, gender, marital status, nationality, race, etc. But these rules do not limit the right of banks (or their regulators) to deny or withdraw banking services from someone at will.

Debanking can therefore be used as a tool or weapon by specific actors/institutions, systematically used against private individuals or industries without due process. Imagine if decisions about who could or could not get electricity were made simply because of position or some arbitrary reason...without explanation, investigation, notification or provision of redress. This is the case with debanking.

Why debank?

Not all bank account closures are "debanks." Banks can close a customer's bank account for a variety of reasons, including if they believe the customer has engaged in suspicious activity. Banks may also proactively choose to reduce regulatory compliance costs and workload by limiting exposure to certain individuals, industries or business models.

However, this legal activity is not the cause of debanking concerns. Instead, many debanking concerns stem from reports of regulators illegally exercising their power to exert undue influence on banks to debank certain industriescustomers, or cancel those associated with factions or interests that the authorities dislike. This allows these regulators to exert power over industry, even though Congress never authorized such power.

Banks often acquiesce to this pressure because they do not want to run afoul of regulators. Many banks also don't want to deal with compliance issues, the additional checks that bank regulators might impose on them because they don't comply.

Where did "Operation Choke" come from?

In 2013, the U.S. Department of Justice was found to have initiated a fraud and money laundering investigation targeting certain businesses as an initiative of the President's Financial Fraud Enforcement Task Force. This marks a shift in strategy: Instead of targeting individual companies for wrongdoing, subpoenas will be issued to banks and payments companies demanding information about their customers operating risky or socially unpopular but legitimate businesses.

In other words, using regulation to improperly "cut off" access to financial services and close accounts with the goal of strangling businesses in industries they don't like (as the then-head of the American Bankers Association, the U.S. banking trade association, observed at this point). In 2014, Frank Keating (former president and CEO of the American Bankers Association, former governor of Oklahoma, and chairman emeritus of the board of directors of the Bipartisan Center in Washington) noted in a Wall Street Journal op-ed:

When you become a banker, no one gives you a badge or puts on a judicial robe. So why is the Justice Department telling bankers to act like police officers and judges? The new Justice Department investigation, called "Operation Choke Point," asks banks to identify customers who may be breaking the law or simply doing something officials don't like.

The program was shut down the following year due to strong legal, congressional, and institutional opposition.

Today, the phrase "Operation Choke Point 2.0" is sometimes used to refer to cutting off the banking business of "enemies and unwanted tech startups." Or in the words of others, the term refers to banks “severing relationships with customers who are deemed politically incorrect, extreme, dangerous or out of bounds”. Regardless of how the term is defined, it is an issue that affects both ends of the spectrum and the entire spectrum entity.

What institutions are involved?

The inner workings of Operation Choke — and any other related or subsequent systemic efforts aimed at depriving specific entities or industries of banking services — were not previously known because of the investigation, if any. was conducted behind closed doors, while a Freedom of Information Act request remains pending. However, on December 6, a court filing in one such FOIA case revealed that the Federal Deposit Insurance Corporation (FDIC) directed at least one bank to (in a letter dated March 11, 2022): “… …Currently, the FDIC hasIt has not been determined what regulatory documentation, if any, is required for banks to engage in such activities. Therefore, we respectfully request that you suspend all crypto-asset related activities. " Numerous FDIC letters were submitted as attachments to the record in this case.

Also, we have learned that the original Financial Fraud Enforcement Task Force (2013) that implemented Operation Choke 1.0 included the FDIC Corporation (FDIC) and the Department of Justice (DOJ), among others. The Office of the Comptroller of the Currency (OCC), an independent agency under the U.S. Treasury Department, is also apparently involved, as is the U.S. central bank, the Federal Reserve Board (FRB). Consumer Financial Protection Bureau (CFPB) was also mentioned.

Note: The United States is not alone in implementing debanking. Others such as Canada have also used this tactic; the UK has also had to investigate complaints against leading debanking. /p> Why is it done? How effective is it?

The reasons for debanking vary from combating payment processor fraud to preventing high-risk businesses from doing business because they may be considered more associated with money laundering. Called "de-risking", not "deb" anking": "The practice of financial institutions indiscriminately terminating or restricting business relationships with large categories of customers instead of analyzing and managing customer risks in a targeted manner."

In a broader sense, De-risking and debanking can be used as "partisan tools" simply for the sake of Another reason may be that some institutions want more discretion and power in deciding "where and under what circumstances consumers can obtain loans, financial products and other banking services." .

To be clear, the issue is not how well a particular agency performs its duties. Overreach (or general abuse of power) in legitimate businesses - without any meaningful due process or ability to constrain their actions, which often occurs behind the scenes, especially since adequate laws and legal methods already exist. to regulate businesses for legitimate reasons, such as providing consumer protection, preventing laundering money and deterring other crimes.

Using debanking tactics can have many unintended consequences. Even if the goal is to truly protect consumers and the banking system, the results can be counterproductive, hinder consumer choice, or These practices also undermine America by having a chilling effect on business as a whole. Its own goals, as stated in the U.S. Treasury Department’s report on de-risking (2023):

Excluding financial activities from the regulated financial system;

Hindering Remittances or delaying the smooth flow of international development funds and humanitarian/disaster relief funds;

Hindering the access of low- and middle-income groups and other underserved groupsEffectively exploit the financial system;

Undermining the centrality of the U.S. financial system.

Finally, using "debanking" tactics can penalize legitimate businesses and individuals for being implicated. For example, someone’s previously approved mortgage was revoked simply because he worked for an open source foundation in the crypto industry.

For all of the above reasons, many describe the practice of debanking as "un-American." When debanking targets emerging technologies indiscriminately, it is unquestionably anti-innovation.

What is the scope of Debanking?

While we cannot speak for the industry as a whole or specific interests, as VCs in the crypto industry we have witnessed at least 30 cases of debanking happening to our portfolio companies and founders over the past four years. Coinbase also publicly stated that they were aware of at least “20 instances of the FDIC requiring banks to ‘pause’ or ‘cease’ or ‘not continue’ to provide crypto banking services.”

There may be more such cases. The issue has gone unreported as many entrepreneurs and small businesses have been hesitant to address it, fearing further retaliation or lacking the resources to address it.

For companies in our portfolio, much of the debanking occurs with companies that are not yet profitable and have not yet issued tokens. Their bank accounts receive venture capital funding (through institutions such as pension funds and university endowments), which the companies use for employee salaries and general business expenses — just like other tech startups.

So what are these companies being told? Either written or (more commonly) spoken? Reasons cited range from "We do not offer cryptocurrency banking services" to, more commonly: "Your account has been closed due to compliance-related issues. Please transfer all funds immediately." These companies were also informed of this, but did not Received specific information as to which "compliance" issue it was and if there really was a problem, they couldn't remedy it. Finally, other reports we received from the company include:

Being told that "the business compliance backend team closed the account and prohibited us from opening any other accounts. No other reason was stated and there is no appeals process." ;

Rejected due to "lack of trust in all those running crypto companies";

Received baseless inquiry letters and notices, causing costly cycles and Unnecessary stress – Their operations are already lean compared to larger companies.